INTERVIEW: Georgia's economy ministry dances to new beat

By bne IntelliNewsSeptember 16, 2010

Samantha Shields in Tbilisi -

Georgia's new minister of economy and sustainable development, the 29-year-old Vera Kobalia, has made more noise in her first three months in office than her predecessors did in the previous two years.

Things got off to a scandalous start when Russian media seized on racy old photographs of her on a night out during a trip to Miami and accused Georgian President Mikheil Saakashvili of appointing a stripper to his cabinet, claims which turned out to be untrue.

"We're not born ministers and when I was at university I went out with my friends. It got blown out of all proportion, but unfortunately this is normal in the political world," Kobalia, a refugee from Georgia's separatist region of Abkhazia who grew up in Canada, tells bne in an interview.

The two economy ministers before Kobalia were each fired after less than a year in the job for failing to deliver on their promises; to her credit she's since managed to shift the attention on to the economy and vowed to push ahead with privatisation, look for fresh sources of foreign direct investment (FDI) and lure budget airlines to Georgia. "It's very important that privatisation happens as quickly as possible," Kobalia says. "After the 2008 war against Russia, we received $4.5bn in aid, and that helped us through the financial crisis. But that money will eventually run out, and the plan is to switch to FDI".

Foreign investment flows showed a few signs of recovery in the second quarter, rising 11% on year to $197m, according to preliminary figures released in mid-September. But that number is still a far cry from the pre-war and pre-crisis heyday, when Georgia was attracting around $2bn in foreign investment a year. The FDI figure for the first half is $272m, not high enough to hit this year's $1bn target.

Kobalia insists the target is still achievable, because she expects investment to pick up in the fourth quarter. She's also trying to attract investors beyond the US, UK and United Arab Emirates, the three regions that have been consistent investors in Georgia over the past few years. "We're trying to diversify and look to Asia. China, India and South Korea are targets," she says.

The next major privatisation goal is the post office, which has 900 outlets across Georgia, Kobalia says, adding that there are also hundreds of state buildings in prime locations to be sold off.

Tourist attraction

The government is also planning to tap the technology sector by setting up IT parks similar to the Free Industrial Zones it has already opened. These offer investors the opportunity to operate tax-free and export goods.

Tourism is still high on Georgia's list of development priorities, Kobalia says. The government has long-held a desire to capitalise on the country's Black Sea coastline and snowy peaks, and turn the country into a popular holiday destination.

The autonomous seaside region of Adjara is already undergoing massive development in a bid to attract visitors, and the next area to be transformed will be Svaneti, an isolated mountain region in northwestern Georgia with spectacular views and great skiing potential.

Kobalia created another stir this summer when Georgian media reported her saying that budget airline Ryanair was interested in flying to Georgia. She later declined to give details, and qualified the statement by saying Georgia would have to completely revamp its second airport in Kutaisi in the west of the country, as budget airlines tend not to fly into primary airports. "We are working with different budget airlines and we're extremely interested in them coming to Georgia. One of our priorities is to bring budget airlines to Georgia and the whole Caucasus region," she says.

So far, Kobalia appears to be making progress - she has publicised real estate to be privatised, appointed a new tourism chief for the country and sacked some members of the Tbilisi Tourist board because their work ethics and professionalism weren't up to scratch. Prime Minister Nika Gilauri said when he appointed Kobalia he hoped she would run the ministry for many years. But whether she can outlast her predecessors remains to be seen.

Juha Kähkönen of the IMF - The Caucasus and Central Asia (CCA) region continues to navigate a wave of external shocks – the slump in global prices of oil and other key commodities, the slowdown ... more

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